Proposed crackdown on bad charities finds no foes

You, too, may have noticed that there’s little politicians can agree on these days, but we’re heartened to report that no one – not asingle Assembly member in beautiful Sacramento! – was ornery enough to oppose a bill that aims to crack down on scam charities.

While hundreds of wanna-be laws died quiet but painful deaths over the last week, this one by Assemblyman Travis Allen, R-Huntington Beach, sailed unopposed out of the Assembly (76 yay, 0 nay) and is now in the Senate for what could be a similarly smooth voyage to the governor’s desk.

What’s all the love about? AB2077 would simply allow the California Department of Justice to tap a $7 million account to make life harder for bad charities that prey on people’s good intentions, but are actually just thinly veiled cash cows for their overlords. The money comes from registration fees paid by all charities and professional fundraisers that operate in California, but it’s now off limits to the attorney general’s enforcers.

The bill “will ensure that the good will of Californians is not taken advantage of, and also fortify the integrity of legitimate nonprofits throughout California,” said Allen in a prepared statement. “Scam charities have been defrauding seniors and other Californians without actually giving the funds to those in need.”

The Assembly’s analysis of the bill says it would cost about $1.4 million a year to support up to 13 positions to handle administrative appeals and court actions related to delinquent nonprofits; help unregistered charities comply with registration and reporting requirements; review charity applications and financial reports; and provide public education and protection activities.

It’s unacceptable when people are tricked into giving money to “one of these scam charities” where only 3 percent of the donation goes toward helping people, Allen said.

The Association for Firefighters and Paramedics in Santa Ana could be a poster child for the 3-percenters. It was spending only 3 percent of its take on services for burn victims when then-Attorney General Jerry Brown sued it in 2009. The charity agreed to a settlement in 2010, but one could argue that things only got worse: It continued to raise millions, but the amount spent on burn victims shrunk to an astonishing 1.5 percent of the take.

In 2012, the amount spent on good works soared back up to 2.8 percent of the take. The charity raised $1.57 million; spent nearly 90 percent on fundraising ($1.42 million); and spent just $44,060 on aid to burn victims, according to its most recent tax returns.

Enforcement only goes so far; people have to be smarter, too.

We’ve been telling you about charities that spend the overwhelming majority of their money on raising money, rather than on good works, for quite a while now. The 50 worst charities in America raised $1.3 billion over 10 years – and almost $1 billion of it went straight to professional fundraisers, according to a recent investigation of America’s 50 Worst Charities by our colleagues at the Center for Investigative Reporting and the Tampa Bay Times.

And we warned you that this would be the Watchdog’s pet crusade for 2014. We looked eagerly to Oregon, which became the first state to try to tackle scam charities last year, passing a law that will yank state and local tax exemptions from charities devoting less than 30 percent of spending to core programs over a three-year period; and we looked hopefully to Florida, where a new law will require charities devoting less than 25 percent to core programs to drop their financial pants, so to speak, and disclose gory details like the total salaries of all employees, travel and overhead expenses, transactions between board members and their family members, and more.

Seriously? Oregon and Florida can do something about it, but California can’t?

These percentage bars are set incredibly low, mind you: The Better Business Bureau likes to see charities dedicate at least 65 percent of spending to core programs and services, while nonprofit watchdog Charity Navigator likes to see 75 percent or more. So asking charities to spend at least 25 or 30 or even 50 percent doesn’t seem unreasonable.

We remain partial to a bill with a built-in floor here in California, but Allen’s bill is a start, and every little bit helps.

If Allen’s bill passes, the AG would be able to spend more time investigating these sorts of things: allegations of criminal activity by charities; self-dealing transactions between a director/trustee and charity; loans by a charity to a director or officer; loss of “substantial” assets during one year; losses of charitable assets through speculative investments; excessive amounts paid by nonprofits for salaries, benefits, travel, entertainment, legal and other professional fees; sale of a charity, or conversion of a public benefit corporation to for-profit status, at a price that appears unfair to the charity; illegal use of charitable funds; and diversion of charitable funds from their intended purpose, according to the AG’s office.

What does the AG generally not investigate? Churches, religious corporations, homeowners’ associations, most mutual benefit corporations, internal labor disputes, and most legal actions between charities and third parties regarding contracts or torts. Persons with complaints in any of the foregoing areas may choose to consult a private attorney to review legal rights and remedies.

Have a complaint? File it at oag.ca.gov/charities. Soon, there might be a few more people around to help.

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